- Associated Press - Wednesday, December 16, 2015

BILLINGS, Mont. (AP) - The market value of a Pennsylvania company’s stake in one of the largest coal plants in the Western United States has been slashed by 87 percent over the past two years, according to figures provided by Montana revenue officials.

The sharp decline in Talen Energy’s partial ownership of southeastern Montana’s Colstrip Steam Electric Station reflects how exposed some utilities have become to the coal industry’s woes.

Talen sells its power on the open market, meaning it can’t pass along its costs to consumers as can the five regulated public utilities that also have stakes in Colstrip.

Elected officials including U.S. Sen. Steve Daines and Rep. Ryan Zinke, both Republicans, frequently hold up Colstrip as an example of how the policies of President Barack Obama are hurting the coal industry.

Talen’s case points to another, more immediate factor at play: cheap natural gas. Analysts say competition from natural gas has emerged as the main force behind sweeping changes within the electricity industry, even before the implementation of pending regulations meant to address climate change by reducing emissions from coal plants.

“It’s much more the pressure from natural gas prices declining. The prospects for coal versus natural gas have deteriorated,” said Julien Dumoulin-Smith, a power sector analyst with UBS Securities.

Talen’s predecessor, PPL Corp., wrote down the value of its stake in Colstrip by more than $400 million in 2013, filings with federal regulators show. PPL spun off Colstrip and other assets earlier this year to form Talen.

Since the 2013 write-down, Montana revenue officials have reduced the value of Talen’s 25-percent ownership in the plant to just $45.5 million - an 87 percent reduction, according to figures provided to The Associated Press by the Montana Department of Revenue.

By contrast, the plant’s market value among Colstrip’s other owners held relatively steady.

Talen’s 2013 write-down was “a recognition that they’re not able to earn the same amount of income. It’s a recognition of the obsolescence of their ownership of Colstrip,” said Montana Department of Revenue Deputy Director Gene Walborn. “Talen has got to go out and compete with other (electricity) generators in a non-regulated market,” Walborn added.

Talen spokesman Todd Martin said that Colstrip’s other owners can include their interests in the plant in customer electricity rates. Martin did not respond immediately to other questions from The AP.

The plant’s fate has major implications for nearby communities. Rosebud County counts on it for about 74 percent of its tax base. That figure is even higher, roughly 90 percent, for the city of Colstrip, where the plant’s towering smokestacks dominate the skyline.

The decreased value in Talen’s ownership has forced Rosebud County to cut its current budget about 10 percent, County Commission Chairman Doug Martens said. Colstrip Mayor Rose Hanser said the city also has gone through belt-tightening.

The lost revenue has been at least partially offset by an increase in overall tax rates. But that means other taxpayers end up paying more, Martens said.

If natural gas prices rebound and electricity markets become more profitable, Colstrip’s value for Talen could increase. But that’s not likely, said Thomas Power, former chairman of the University of Montana’s Economics Department.

More likely, Power said, is for the older two of Colstrip’s four generating units to be retired. The older units were built in the 1970s and are considered the most likely to be shut down if new emissions reductions are imposed.

“They’re older, they’re less efficient, they’re dirtier,” Power said. “The value of them is certainly not going to bounce back up.”

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